Question

Many employees do not like having a position dealing with numbers. However, the video this week is a good illustration of the connection between numbers (dollars!) and the relationship between a small business and the town in which it resides. Marty Doepke states that Pop's is the largest source of tax revenue for the very small town of Arcadia, Oklahoma. Speak on the importance of the accounting and finance functions of business. Be creative in your responses, but address the importance of having managers who appreciate this function, even if they are not strictly accounting/finance types. Tie your answer back to at least one principle you learned from this week's readings.

Answer 1

Finance and accounting function involves analyzing the transactions and movement of cash flows to assess the financial condition and financial health of the organization, other than doing regular activities such as managing accounts and preparing final statements among the other. The key information passed on to the management, help them take informed decisions in terms of procurement of funds, budgeting, allocation of the funds and focusing upon the raising efficiency. It helps organization to refocus the approach and work in a way, so that organization has sound financial health, a very important factor for its survival and continuity. It makes finance and accounting function to be very important for the organization.

Further, it is a finance and accounts function that works to perform ratio analysis to find the growth rate in revenues, operating expenses, net profit as well as other investment ratios so that organization remains attractive from the perspective of investment. It also helps identify warning signs that can make organization to wind up if not workers properly. Hence, it also helps a manager to remain proactive and take initiatives at the right time. It is only done with the help of finance and accounting function, signifying its importance.  

The principle named as disclosure principle, is fittingly applied to the function as it discloses important information, not only for the internal stakeholders, but also for the external stakeholders such as community and regulatory bodies. It makes the organization comply with the regulations.